Research & Gurus
Haunted by the Inner Bag Lady
Are you haunted by an inner bag lady, by a fear that you’ll be waiting tables and soaking your aching feet at 65 instead of heading for the vacation of your dreams? Then you’re not alone. A new survey on women’s issues shows us why we need to invest. But it also shows that there is a huge gap between what we need to do and what we’re actually doing.
In a unique collaboration between two of the nation’s leading media companies, Meredith Corporation (MDP) and NBC Universal (GE) announced key findings of a nationwide survey conducted among more than 3,000 women that covered a wide range of important topics to women, including marriage and family, health and fitness, safety, and financial matters.
The study, titled “What do Women Want?,” brought together the resources of Meredith, recognized for its well-known media brands such as Ladies’ Home Journal, More, Family Circle, Better Homes and Gardens, Fitness, Siempre Mujer and BHG.com, and NBC Universal whose brands include The Today Show, MSNBC, Bravo, Oxygen, Access Hollywood, Telemundo, and iVillage.
The findings from the “What do Women Want?” study reveal that women and their families are experiencing tremendous financial woes and are very concerned about their long term financial security. For example, two-thirds (68%) of women in the study cited “financial strain” as a major threat to the American Family – and a much bigger threat than “divorce” (48%), “loss of faith/spirituality” (47%), “liberal views on sex and sexuality” (32%), “both parents working” (28%), “unwed mothers” (21%) and “couples living together instead of getting married” (19%).
Three quarters of women are concerned about the future of social security (77%) and saving enough for retirement (75%). Baby Boomer women are especially concerned about the future of social security (84%), while Gen X women are particularly concerned about saving enough for retirement (84%). Two-thirds (67%) of women and/or their partners are counting on social security for retirement – this is especially high for Baby Boomer women (79%). Two-thirds of Gen X women and/or their partners are counting on social security (65%) and their 401(k)/Roth/IRAs for retirement (64%).
Despite these concerns, however, the reality of what women are actually doing to secure their financial futures is worrisome. Only half (54%) of women put money in savings on a regular basis – somewhat higher for Gen Y (60%). And here’s the kicker. Only 13% of women say they regularly make investments in stocks, bonds or mutual funds. More than a third of women (38%) say they feel overwhelmed by the complexities of investing.
And that’s why we sometimes feel like evangelists when it comes to the subject of women and investing. Women need to make that leap of faith and start investing, however small an amount they’re able to put aside on a regular basis. Just think of it as a magic tip jar that will grow and grow. Don’t you deserve a secure future, as hard as you work?
May 02, 2008 • Research and Gurus
Sex, Risk and Stocks
Do you ever think about your Apple stock the way you think about, say, Brad Pitt? Do you daydream about owning shares of Dreamworks the way you do about dating a dreamboat? Then you’re an exception. It’s actually men who seem to confuse sexual attraction with stock attraction.
Remember the big investing bubble of the ‘80s when strutting Wall Street types called themselves Masters of the Universe? Well, it turns out these testosterone-driven traders might be masters of Mars, but we women still have control of Venus when it comes to investing. Thank goodness.
More and more study results keep pouring in that reveal the astonishing, amazing, bewildering fact that men think differently about investing than women. And that, in fact, sex and testosterone have something to do with the way they invest. Duh!!! Actually, we women shouldn’t be surprised. Not being burdened with an excess of testosterone, we’re already free of a biological compulsion for risk that drives many male investors.
A study by Cambridge University, which measured the hormone levels of young male stock traders as they made high-stake deals, showed a direct correlation between trades and testosterone levels. The researchers found that the traders tended to make more money on days when their testosterone levels were high. That is, they took bigger risks when they were getting a high from their huevos, as our Latina friends might express it.
A Wall Street Journal writer conjectured that this could mean that testosterone could also play a role in inflating stock prices and creating economic bubbles.
In another study, which took place at Stanford University, researchers used brain scans to find out what was going on inside of the minds of Masters-of-the-Universe-to-be when they took financial risks. And guess what was on their minds? It was sex. When young men were shown erotic pictures, they were more likely to make a bigger financial gamble than if they were shown a picture of something scary, such as a snake, or of something harmless, like a stapler.
The researchers found that the erotic pictures lit up the same part of the brain that lights when financial risks are taken. So for young male investors, women and money light up the same place in their brains.
It’s a little sobering to think that Angelina Jolie and a big chunk of Google stock would turn on a young man in the same way!
As for women, perhaps we’d better stay away pictures of Brad Pitt before we put in our buy orders in the morning. (Just joking!) But the real lesson, I think, is that we need more women investors in the stock market to keep those bubbles from forming in the first place, and to keep our household finances from being beholden to testosterone.
So if women are labeled as “slaves to fashion,” sometimes spending too exuberantly, then men are just as much slaves to their stock trades.
Here’s another thing. If women can be labeled, however unfairly, as “slaves to fashion,” sometimes spending too exuberantly on shoes, then men are just as much slaves to their stock fetishes – spending way too much on bubble-building pie in the sky.
April 21, 2008 • Research and Gurus
Another KISS from a Top Investing Guru
These are the times that increase sales of Xanax and Zantac to worried investors. Somewhere, stomachs are churning, and sleepers are tossing and turning. The credit markets are in a crisis, and everyone is wondering where the “bottom” is. But the smartest of investors have told us over and over that these are not the times to sell everything or to drastically change our strategies. Just relax, they say. Don’t panic. And we agree, though it’s sometimes hard to keep to our own mottoes. We’ve already talked about Warren Buffett’s KISS, with our own modification: “Keep it simple, sisters.”
So now we have yet another guru reinforcing the strategy that we promote here: which is to cover your assets by diversifying with a portfolio of index funds and exchange-traded funds. David F. Swensen, who has run the Yale endowment since 1988, and who has beaten all other such endowments this past year, says to avoid anything fancy. “Stick to a simple diversified portfolio, keep your costs down and rebalance periodically to keep your asset allocations in line with your long-term goals,” advises Swensen.
He recently told the New York Times that most investors should stick with a very basic approach, using index funds and ETFs (exchange-traded funds) and maintaining a long-term asset allocation, even when the markets are extremely volatile. His recommended allocation is remarkably similar to our “Deluxe Lazy Woman’s Portfolio,” except that his allocation for real estate is larger than ours. That would have hurt in the short run, but not in the long term. (We still think our own percentage is better, but we’re not funding Yale University.)
Here is Swenson’s recommended allocation, which he also advocated in his book, Unconventional Success: A Fundamental Approach to Personal Investment:
30% domestic stocks
15% foreign stocks
5% emerging-market stocks
20% real estate
15% in Treasury bonds
15% in Treasury inflation-protected securities (TIPS)
The real estate investment can be made through real estate index funds, though it can also be made through actual investment in bricks and mortar, if you’re so inclined. If you’ll take a look at our quick and easy Lazy Woman portfolios, you’ll see that we’ve laid out the actual index funds or exchange-traded funds that could be used to create such an allocation.
February 23, 2008 • Research and Gurus
A “KISS” from Warren Buffett: Keeping It Simple
As we move along in our investing workouts, it’s important to heed some wisdom from the billionaire that many consider the greatest investor in history: Warren Buffett. Now age 77, Buffett built a small insurance business into the source of fortunes not only for himself but for many of his investors: Berkshire Hathaway. Not many people can afford A shares in the company these days, since they go for more than $100,000 a share!
Buffett’s forte has been picking companies to buy that are either unnoticed, unappreciated or undervalued by the market: the bargain-hunter extraordinaire. He has picked companies at reasonable prices that have “large moats.” That means that they have a strong advantage against their competitors. But Buffett’s highly successful strategy doesn’t mean that when he talks about stocks, we can’t understand what he’s saying. Buffett summed up his philosophy in the acronym “KISS,” which stands for “Keep it simple, stupid.” But we prefer to adapt his philosophy with a slightly nicer slogan: “Keep it simple, sisters.”
Fidelity’s Peter Lynch, another legendary stock picker, had a similar philosophy. In fact, he was known to start a one-minute egg timer while on the telephone with traders and analysts. If the analyst couldn’t make a strong case for a stock or a trade within the allotted time, chances were that Lynch was going to nix it. Lynch, too, was famous for buying unwanted and unloved companies. He even referred to companies that had a bad “smell.” We won’t go that far, but sometimes a negative perception will keep a stock’s price down unfairly until the rest of the market finally sees the light.
Buffett recommends that investors considering a purchase actually compose a brief paragraph explaining why they want to buy a company. We think it might sound something like:
“I want to buy 100 shares of Acme Explosives at $10 a share because I believe the company’s reputation was hit unfairly when its CEO was sued by Mr. Wile E. Coyote, who suffered powder burns when in pursuit of the Roadrunner. We believe Mr. Coyote and not Acme Explosives was at fault. We think that the company is seriously undervalued and that the demand for its anti-Roadrunner explosives will only increase as the coyote population explodes, so to speak. The TNT supply is plentiful and cheap, and Acme is far ahead of its competitors in the quality of its products and continuing innovation in means of delivery.”
By summarizing the situation, you can look at the substance of your argument to determine whether it holds water. That way, you’ll get to the really important numbers that will affect the stock price in the future, whether it is sales growth, profit margins, or relative position in the market with regard to competitors. The key is whether the argument for buying the company depends on too many variable factors rather than two or three basic facts that can be verified. If buying Acme Explosives depends on too many things coming together—increased government contracts, let’s say, or an end to a strike by the Roadrunner Union and obtaining enough TNT at low prices, as well as a doubling of the current coyote population --chances are that you’re depending too much on fate.
December 18, 2007 • Research and Gurus